BNM 'closely monitoring' household debt levels

Bank Negara Malaysia (BNM) governor Zeti Akhtar Aziz today said that the central bank is “closely monitoring” the levels of debt undertaken by low-income households in order to avoid a subprime crisis unfolding in the country.

“Households with incomes less than RM3000 (a month) and below are increasingly over-leveraging, borrowing not for assets like houses or cars, but taking up personal loans.

“This is where the concern arises and we are taking up this issue with agencies like cooperatives, etc, who lend a significant amount (to these households),” she told reporters.

Speaking after presenting BNM’s annual report at its headquarters in Kuala Lumpur, she said that lower income households only make up 11 percent of the portfolios of commercial banks.

She said that while those with a steady income stream should not be deprived of credit, measures are being taken to ensure sustainability.

“If too high a percentage of earnings is used to sustain debt, it is not sustainable. In the United States, this caused the subprime crisis.

“It is not a concern now, but it could be in the future so we are taking action now,” she said.

The actions, she said, include working with non-bank lending agencies to take up responsible lending guidelines.

The non-bank agencies who provide credit services include cooperatives.